FX Update: The AUD dove following a sub-forecast China PMI FX Update: The AUD dove following a sub-forecast China PMI reading for manufacturing, which plunged to a preliminary 48.2 in July, well short of projections for a modest erosion following the final 49.4 in June. AUD-USD hit a six-year low of 0.7269 after declining almost a whole big figure, subsequently recouping to the 0.7300 area but remaining net lower for the day. Weaker commodity prices this week had already been weighing on the Aussie. Elsewhere, the other commodity bloc currencies and most dollar pairings held mostly in narrow ranges. USD-JPY traded near 124.00, holding well within yesterday's range, with a decent Japanese manufacturing PMI having little impact on the yen nor Japanese stock markets, which instead were more preoccupied by the much worse Chinese PMI. EUR-USD consolidated yesterday's gain in a narrow range in the upper 1.09s, leaving yesterday's nine-day high at 1.1018 untroubled.

Treasury Option Action: a variety of flows Treasury Option Action: a variety of flows have swept through the otherwise fairly static and quiet options market, according to sources. Among the largest vs 10-year futures were bullish sellers of 4k in August 127/126/125 put butterflies and bearish seller of 1.5k in August 126.5 calls. Also cited were bullish buys of 3k in August 126+ calls and 2k in week 5 126/127 call 1x1.5s. September 10s are now 9-ticks higher near 126-19 after the stock market slump, compared to an updated range of 126-19 to 126-04.

13:20 EDT

FX Action: USD-JPY has pulled back FX Action: USD-JPY has pulled back to near overnight lows, touching 123.75 so far. The soft risk backdrop has weighed, as Wall Street adds to losses, commodities tank, and as yields settle a bit lower. Support is seen into Wednesday's 123.57 base, with sell-stops said to be building at 123.50.

U.S. New Home Sales Preview U.S. New Home Sales Preview: June data on new home sales is out on Friday and should reveal a 1.1% decline to a 540k (median 549k) pace from the 546k pace in May which set a new recent high. Other housing indicators have generally improved for the month with starts rising to 1,174k from 1,069k in May, existing home sales rising to 4.950 M from 5.320 M and the NAHB Index up to 60 from 54.

FX Action: USD-CAD has perked up FX Action: USD-CAD has perked up from its post-data 1.2948 lows, trading back over 1.3030 as the commodity market meltdown continues. WTI crude is under $49/bbl, as gold prices stay under $1,100, and copper flirts with six-year lows. Should commodity prices fall further, the odds for another BoC rate cut will rise, and will keep the CAD under pressure.